ATRA Section 644 would let the 24 CO-OP organizers that have obtained startup loans keep their funding, but the section eliminates 90 percent of the funding authorization for future U.S. Department of Health and Human Services (HHS) efforts to award startup loans to CO-OP organizers.

The Patient Protection and Affordable Care Act (PPACA) CO-OP program is supposed to increase competition in the health insurance market by creating a new type of member-owned, nonprofit health insurer.

"Since long before the fiscal cliff agreement, the big health insurance companies have fought the new CO-OPs because they represent a real opportunity to lower health insurance premiums and allow consumers to belong to a member-governed heath insurer," Morrison said in a statement about ATRA Section 644. "This fiscal cliff agreement gives the health insurance giants their wish.... Unless something is done to reverse this travesty, half of our country will have access to innovative, efficient, member-governed non-profit health insurance, and half will not."

Originally, the CO-OP program had a $3.4 billion budget allocation, and HHS could have used that funding to support a total of about $7 billion in loans, NASHCO said.

The 24 CO-OP organizations with HHS funding commitments are set to borrow about $2 billion, NASHCO said.

The ATRA CO-OP funding cut will eliminate a budget allocation that could have supported about $5 billion in additional startup loans, NASHCO said.

In addition, ATRA Section 644 slashed CO-OP loan funding just days after two dozen would-be CO-OP organizers rushed to get applications to HHS in time to meet a Dec. 31, 2012, funding opportunity deadline, NASHCO said.

PPACA encourages states to offer CO-OP coverage through their new PPACA health insurance exchanges -- the Web-based health insurance supermarkets that are supposed to start selling coverage to individuals and small groups in late 2013.

HHS was preparing to fund one CO-OP per state, but a CO-OP can operate in more than one state. In theory, states that end up without their own CO-OPs as a result of ATRA Section 644 could let out-of-state CO-OPs sell coverage through their PPACA exchanges.